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1980 DIGILAW 34 (KER)

HAJEE MOHAMMED v. ASST, COMMR. OF SALES TAX

1980-01-28

T.KOCHU THOMMEN

body1980
Judgment :- 1. The petitioner challenges Ext. P-1 order of the 1st respondent dated 30-3-1977 and Ext. P-3 order of the 2nd respondent dated 9-8-1977. Ext. P-1 was made under R.31 of the Kerala General Sales-tax Rules, 1963 ('the Rules'), calling upon the petitioner to pay the penalty in terras of S.23(3) of the Kerala General Sales-tax Act, 1963 ('the Act'). Ext. P-1 was affirmed by Ext. P-3. 2. According to the petitioner, no penalty for non-payment of tax as per the provisional assessment can be imposed subsequent to the completion of the final assessment, and in any case an order imposing penalty has to be preceded by a show-cause notice 3. For the year 1973-74, a pre-assessment notice dated 20-9-1973 was served on the petitioner. This was challenged in O.P. No. 3496 of 1973 and an interim order of stay of collection of tax was obtained. The O. P. was dismissed by judgment dated 14-2-1975. A provisional order of assessment for the year 1973-74 had been served on the petitioner on 18-10-1973. On 14-4-1975 the final order of assessment was passed. The tax due as per the final order of assessment was paid in full on 16-1-1976 Subsequently Ext. P-1 dated 30-3-1977 levying penalty for non-payment of tax as per the provisional assessment in terms of R.31 was issued to the petitioner. 4. Petitioner's counsel submits that the provisional order of assessment merged into the final order of assessment, and it was not open to the department to demand penalty for non-payment of the tax as per the provisional assessment if no such amount was taken into account at the time of adjustment after the final assessment and determination of the amount payable towards it as per R.20. Counsel further contends that at the relevant time the section as it stood did not postulate collection of penal interest for non-payment of tax. What S.23 (3) warranted was payment of penalty. No penalty can be imposed, it is pointed out, except after giving the assessee an opportunity of showing absence of mens rea or wilful default. Counsel points out that penalty is a punishment, the imposition of which has to be in compliance with the principles of natural justice. Counsel further contends that the contrary view expressed by this Court is Burmah shell Oil Storage and and Distributing Co. Counsel points out that penalty is a punishment, the imposition of which has to be in compliance with the principles of natural justice. Counsel further contends that the contrary view expressed by this Court is Burmah shell Oil Storage and and Distributing Co. of India Ltd., Madras-1 v. The Sales-tax Officer, Special Circle, Ernakulam & others (32 S.T.C. 429) requires reconsideration. 5. S.23 deals with payment and recovery of tax. This section is wide enough to take in tax payable under S.17 as well as under S.18. Sub-section (3) of S.23 reads: " (3) If the tax assessed or any other amount due under this Act or any instalment thereof is not paid by any dealer or other person within the time specified therefor in the notice of demand or in the order permitting payment in instalments or within the time allowed for its payment by the appellate or revising authority, the dealer or other person shall pay, by way of penalty, in the manner prescribed, in addition to the amount due, a sum equal to The liability to pay penalty at the prescribed rate is in addition to and independent of the tax payable by the assessee. R.20 allows adjustment after final assessment. This rule reads: "20. Adjustment after final assessment: After making the final assessment under sub-rule (4) or (5) of R.18 the assessing authority shall examine whether any and if so, what amount is due from the dealer towards the final assessment after deducting any tax already paid on the provisional assessment, with reference to R.13 or 14 or 15 or at the time of submission of return in Form 8 with reference to sub-rule (3) of R.18. If any amount is found to be due from the dealer towards the final assessment, the assessing authority shall serve upon the dealer a notice in Form 14A and the dealer shall pay the sum demanded within the time and in the manner specified in the notice. If the tax due on the final assessment is lower than the tax already paid, the assessing authority shall refund to the dealer the excess tax if no other amount is due from him or adjust the excess tax towards the recovery of any amount due on the date of adjustment, from the dealer as provided in S.44 after giving due notice to the dealer. If the tax due on the final assessment is exactly equal to the tax already paid, the assessing authority shall inform the dealer that no further amount is due from him towards it." If upon final assessment amounts are found to be due from the assessee he shall be called upon by notice in Form 14B to pay the balance amount. If on the other hand he has paid as per the provisional assessment amount in excess of what was determined to be due from him, upon completion of the final assessment such excess amount is repayable to him or adjustable after notice towards any other amount due from him. The adjustment contemplated under R.20 is without prejudice to the right of the Department to demand of the assessee the penalty payable by him in terms of S.23(3) read with R.31. R.31 reads: "31. Mode of payment of penalty: (1) The penalty payable under sub-section (3) of S.23 shall be remitted into the Government Treasury or paid by means of crossed cheque or crossed demand draft in favour of the assessing authority concerned either separately or along with the tax. (2) The assessing authority concerned may calculate the penalty payable under sub-section (3) of S.23 from time to time and may issue a notice in Form 24. On receipt of the notice the dealer shall pay the penalty due in the manner specified in sub-rule (1). Explanation: The dealer or other person concerned shall however be liable to pay the penalty under sub-section (3) of S.23 whether he receives a notice under this sub-rule or not." The amount determined to be due from the assessee by way of penalty has to be notified to him and on receipt of such notice he is liable to pay such amount. The Explanation however makes it clear that the liability of the assessee is not dependent upon the notice. The liability arises under the relevant provisions and do hors the notice. These provisions indicate that notwithstanding the completion of the final assessment proceedings and the adjustment of the balance amounts in terms of R.20 the liability for penalty, if incurred by the assessee, remains enforceable even subsequent to the completion of the final assessment. The liability arises under the relevant provisions and do hors the notice. These provisions indicate that notwithstanding the completion of the final assessment proceedings and the adjustment of the balance amounts in terms of R.20 the liability for penalty, if incurred by the assessee, remains enforceable even subsequent to the completion of the final assessment. The argument that the provisional assessment is merged into the final assessment and therefore any amount payable pursuant to the provisional assessment is no longer recoverable from the assessee once the adjustment under R.20 has been made is not sustainable. 5. The contention as regards non-compliance with natural justice has only to be stated to be rejected in the light of the categoric pronouncement of this Court on that point in Burmah Shell Oil Storage and Distributing Co. of India Ltd. Madras-1 v. The Sales-tax Officer, Special Circle, Ernakulam and others (32 STC. 429 at 434). Distinguishing the decisions of the Supreme Court in M/s. Hindustan Steel Ltd. v. The State of Orissa ((1970) 25 STC. 211 (SC)); Commissioner of Income-tax, West Bengal v. Anwar Ali ((1970) 76 ITR. 696 (SC.)) and C A. Abraham v. Income-tax Officer, Kottayam ((1961) 41 ITR. 425 (SC.)) this Court stated as follows: 'There cannot be any dispute regarding this proposition. But, the question for us to consider is whether these decisions can apply to the case before us. The language of S.23 (3) appears to make the payment contemplated by the section as absolute liability on the assessee. If the tax assessed is not paid within the time allowed, whatever be the reason for the non-payment, the dealer or other person shall pay, by way of penalty, in the manner prescribed, in addition to the amount due, a sum equal to half per cent of such amount for each month or part thereof, for the first three months, and one per cent of such amount for each month or part thereof, subsequent to the three months. There is no question of the taxing authority exercising any discretion under the statute; no discretion is contemplated or vested in the authority. The penalty at the particular rate mentioned in the section automatically clinches on the failure to pay the amount within the time mentioned in the section. There is no question of the taxing authority exercising any discretion under the statute; no discretion is contemplated or vested in the authority. The penalty at the particular rate mentioned in the section automatically clinches on the failure to pay the amount within the time mentioned in the section. If there is no discretion left in the assessing authority by the statute itself, there is no question of the exercise of discretion being quasi-judicial and no question of giving notice to the assessee before the exercise of discretion. As we have stated already, the penalty is in the nature of interest by way of damages payable on the defaulted amount at the particular rate mentioned in the section itself. Therefore, the decisions cited by the counsel of the petitioner cannot have any application to the case. Looking at the case, once again, from the angle of natural justice, we would point out that the statutory provision, we mean S.23 (3), excludes the application of the rules of natural justice, and in such cases, we cannot ignore the mandate of the Legislature; the mandate of the Legislature is clear in the language of the section; we cannot read into the concerned provision the rules of natural justice; that will not be consistent with the language Of the section: vide Union of India v. J. N. Sinha (AIR. 1971 SC. 40)." 6. In the light of that decision the contention that the penalty did not and could not accrue until after due notice was issued to the petitioner has no merit. The mental element of mens rea or wilful default is irrelevant to the question, the liability being absolute. 7. The petitioner's counsel submits that that decision requires reconsideration. The only reason stated in support of that submission is that this Court read 'penalty' as 'imposed by way of damages.' The reason for so reading the expression is clearly stated; and 1 see no merit on the criticism against it. , 8. Counsel further submits that at any rate a stay of collection operated during the pendency of OP. No. 3496/ 73 which was disposed of only on 14 21975 when the OP. itself was dismissed. Counsel says that until then no penalty could have accrued. , 8. Counsel further submits that at any rate a stay of collection operated during the pendency of OP. No. 3496/ 73 which was disposed of only on 14 21975 when the OP. itself was dismissed. Counsel says that until then no penalty could have accrued. I am not impressed by this argument, for the effect of an interim stay is not to prevent the accrual of interest or penalty that is due and payable under the statute, but to impose a fetter upon the recovery of such amounts. With the dismissal of the OP. and the removal of the fetter under the interim order, the interest which had been accruing as per the relevant provisions became recoverable. That being the position interest which had accrued during the relevant period is payable by the assessee and recoverable by the Department in terms of the statute. The attack on Exts. P1 and P3 fails. The OP. is dismissed. In the circumstances of this case I make no order as to costs. Dismissed.